CICC: Maintaining Everbright Environment (00257) Outperforms the Industry Rating Target Price of HK$6.16

The Zhitong Finance App learned that CICC released a research report stating that considering the performance of Everbright Environment (00257) 1H26 was in line with expectations, it maintained the 2026/2027 net profit forecast of HK$42.8/4.66 billion. The current stock price corresponds to 2026/2027 7.5x/6.9x P/E. Maintaining an outperforming industry rating and target price of HK$6.16, corresponding to 2026/2027 8.8x/8.1x P/E, with 18% upside compared to the current stock price.

CICC's main views are as follows:

1H26 results are in line with this forecast

Everbright Environmental announced 1H26 results: operating revenue -0.9% YoY to HK$14.181 billion, with operating service revenue +8.2% YoY to HK$10.755 billion, net profit to mother +10.2% YoY to HK$2,431 billion, EBITDA +4.3% YoY to HK$6.307 billion, and EBITDA margin +2.2ppt to 44.5% YoY. The interim dividend per share was HK16 cents, +6.7% year over year, with a dividend payout ratio of 40.4%.

Environmentally-friendly energy: Increased steam supply for waste treatment and heating supports performance

1H26 Environmental Energy Revenue +7.8% YoY to HK$8.074 billion, EBITDA +3.2% YoY to HK$4.373 billion, and EBITDA margin -2.4ppt to 54.2% YoY. The processing capacity of the stock project increased steadily, with the amount of waste entering the factory +2.4% to 27.14 million tons, and the feed-in power supply +1.9% to 9.026 billion kilowatt-hours; the expansion of heating was accelerated, and the gas supply volume was +10.6% to 1.83 million tons; and the amount of food and food waste treated was +2.0% year-on-year. The power generation efficiency is basically stable, and the tonne power generation capacity is -1.3% year-on-year.

Green Water: Increased treatment capacity and increased project prices to increase profits

1H26 environmental water revenue was -27.1% YoY to HK$2,392 million, EBITDA -9.2% YoY to HK$1,082 million, EBITDA margin +8.9ppt to 45.3% year over year; profits declined due to reduced revenue from construction services, and stock business prices rose sharply: sewage treatment volume +6.4% YoY, and 2 sewage treatment plants were approved and prices increased by 8%-35%.

Green environmental protection: Biomass business heating emissions support revenue. 1H26 green environmental EBITDA +5.7% year-on-year to HK$1,044 billion, and EBITDA margin +0.9ppt to 29.9% year-on-year.

Improvement, national supplement settlement is normalized

The overall payback of 1H26's accounts receivable was about 12.8 billion yuan, and the recovery rate was +6.5ppt to 86% year over year; its recovery rate in China accelerated markedly, and the 1H26 recovery rate was +35.9ppt to 67.4% year over year. At the same time, since May of this year, the national supplement has been settled on a monthly basis, and it is expected that the company's cash flow performance will continue to improve.

Risk warning: The amount of garbage disposed of falls short of expectations, and payables are slower than expected.